Another Stockman feat of economic insight. The US malaise that has traversed decades and administrations only worsens with time – growing and inflating towards an inevitable mega-crash of currency and asset valuations. The Donald had a chance to stop the trajectory, but has proven himself utterly unaware of the basic roots of the disease.
“The overwhelming source of what ails America economically is domiciled in the Eccles Building. During the past three decades the Federal Reserve has fostered destructive financial mutations on Wall Street and Main Street and among the household, business and government sectors of the national economy alike.
“These Bubble Finance polices have fueled an egregious financial engineering spree by the C-suites of corporate America to the tune of $15 trillion of stock buybacks, debt-fueled M&A deals and LBOs during the last decade. These actions have stripped-mined balance sheets and cash flows from main street businesses, thereby garroting economic growth—even as they delivered multi-trillion windfalls into the hands of a few ten thousand speculators on Wall Street.
“At the same time, the Fed fostered a borrowing binge in the household sector after the 1980s. It eventually resulted in Peak Debt and a $15 trillion albatross of debilitating debts on the homes, cars, incomes and futures of what used to be middle-class America.
“All the while, it also led politicians down the primrose path of free-lunch fiscal policy. That is, by monetizing $4.2 trillion of Treasury and GSE debt during the last three decades, the Fed anesthetized the US economy from the baleful effects of crowding out and rising interest rates that would have otherwise resulted from soaring government deficits. At length, this left the public sector impaled on Peak Debt, as well.”
Read the full article here at LRC.